TNM Staff| Wednesday, June 1, 2016 – 11:10
The new LDF government in Kerala rode into power on the promise of “setting things right”, and in the process set the bar rather high for their new government.
Complicating matters further, the new Finance Minister of Kerala Thomas Isaac, on Friday, revealed that only Rs 700 Cr is left in the state treasury, and warned of an economic crisis much like the one between 1990 and 1993.
The News Minute asked economic and business experts how the new Finance Minister should set his priorities to best tackle current realities and deliver on the people’s expectations. E-governance, tax administration, encouragement for the startup ecosystem and wetland conservation and rejuvenation of the farming sector were some of the top priorities they identified.
D Dhanuraj, Chairman of the Centre for Public Policy Research said that the government cannot escape with merely declaring that the state economy is in a poor state, but must provide a comprehensive solution to the problem. He felt that the government must rethink the pricing mechanism and bring down the level of state dependency.
“The state government should stop spending on Public Sector Undertakings (PSU) and re-evaluate the need to do so. Most often, the first thing a newly elected government does is to declare PSUs. The state government must instead open up the sector and not become an employer,” Dhanuraj said.
He also emphasised the need for e-governance initiatives in the state which would eventually lead to downsizing of the government. He also pointed out that more focus should be laid on the development of railways.
KN Harilal, a Professor at the Centre for Development Studies felt that the finance ministry should first concentrate on resolving short-term treasury crisis and then formulate long-term policies that will strengthen the financial strength of the economy.
“As a long-term plan, the government must improve the tax system so that government’s revenue can be increased without making major policy changes. By encouraging the practice of remitting tax, the government can increase its revenue even without having to increase tax rates. Thomas Isaac was able to achieve this to a great extent in his earlier tenure as the Finance Minister,” he said.
Harilal, a former member of the Planning Commission, added that a stronger tax administration, along with robust e-governance could play a major role in strengthening the financial health of the state.
Sanjay Vijay Kumar, Chairman of the Startup Village in Kochi, identified the startup ecosystem of Kerala as one area with great potential for improvement. In particular, he said that current practices of phased fund allocations needed to be radically altered as they affect the growth potential of startups.
“Only rarely is 100% fund allocation done at one go, and this caused challenges in financial planning in the functioning of the companies,” he said.
“The startup eco system in Kerala is almost fifteen years behind that of Bengaluru, owing to infrastructure, availability of mentors, angel and venture capital funds issues, and large number of incubators, among others. For the startup ecosystem in Kerala to strengthen itself, a direct access to global startup ecosystems is highly essential,” he said.
He further added that the state must find ways to attract successful Malayalee entrepreneurs from outside Kerala to invest in companies in the state. Laying emphasis on the importance of strengthening the Kerala Technical University (KTU) in order to promote more research, he said, “KTU has potential to have best quality standards and the state government should try to bring the university at par with international standards in research.”
KG Padmakumar, former director of Kerala Agricultural University, identified climate change as one of the major issues that needs to be addressed. “Over and above the other crisis, the effects of climate change have already begun to be felt and we need immediate policy actions to handle the crisis,” he said.
He added that the government should carry out sustained measures to rejuvenate the farming sector. “Enough attention is not being given to sustaining wetlands in the state, which also serves the purpose of water storage. Wetlands need to be identified for its ecological values,” he added.
This article was first published in The News Minute on 1st June 2016 click the link to read What should be Kerala Finance Minister Isaac’s top priorities? Experts speak out